The Financial Conduct Authority has agreed a new approach to processing payments with major high street banks which will prevent customers being hit with penalty charges of up to £200m a year.
Barclays, The Co-operative Bank, HSBC, Nationwide, Royal Bank of Scotland, Santander, and Clydesdale and Yorkshire Banks have adopted the new payment agreement.
It will mean these banks will use a same day “retry” system to process payments which may otherwise have incurred a late payment charge.
Lloyds Banking Group already operates this kind of payment system, but is updating its systems so that it is used for all transactions.
Customers who incur late payment charges ahead of the update will be able to get these charges refunded.
Payments in and out of bank accounts using the Faster Payments Service are processed within two hours.
But because banks process payments such as direct debits, credits and standing orders early in the morning, if a customer makes a deposit or receives their salary after these payments have been processed they have to pay unpaid item charges.
The FCA agreement will mean if money is not in a customer’s account when a debit is taken, the bank will retry the payment in the afternoon before finalising the transaction.
Banks will also have to be clear with customers about the time money must be in their account to meet outgoing payments.
FCA director of supervision Clive Adamson says: “It is little things like this that have a big impact on customers’ everyday banking experience, even though many people will not be familiar with the process. This is a small adjustment, but one that will make a big difference.
“We are committed to putting customer interests at the heart of everything the FCA does, and it is encouraging the banks are also beginning to take this approach. There are no new rules here – this is an agreement with the industry; working together for the benefit of consumers can often be more effective than writing new rules, and it certainly delivers results more quickly.”
The FCA plans to publish a paper in the summer looking at how easy it is to cancel continuous or recurring payments.
It is also working with the Payments Council to improve payment services for bank and building society customers.